Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to the Telefônica Brasil 2016 and Fourth Quarter of 2016 earnings conference call. Today with us representing the management of Telefônica Brasil, we have Mr. Eduardo Navarro, CEO; Mr. David Melcon, CFO and Investor Relations Officer; Mr. Christian Gebara, CRO; and Mr.

Luis Plaster, IR Director. We also have a simultaneous webcast with slide presentation on the Internet that can be accessed at the site www.telefonica.com.br/ir and Engage-X [ph] platform. There will be a replay facility for this call on the website. After the company’s remarks are over, there will be a question-and-answer session.

At that time, further instructions will be given. [Operator Instructions] Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996.

Forward-looking statements are based on the company’s management beliefs and assumptions and on information currently available. Forward-looking statements are not guarantees of performance.

They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future.

Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the company’s future results and could cause results to differ materially from those expressed in such forward-looking statements. Now, I will turn the conference over to Mr.

Luis Plaster, Investor Relations Director of Telefônica Brasil. Mr. Plaster, you may begin your conference..

Thank you. Hello, everybody. Thank you for joining us in this conference call for the fourth quarter and year 2016 results of Telefônica Brasil. Our call will be divided in three parts. In the first part, our CEO, Eduardo Navarro, will give you an overall view of our operating and financial results for the quarter and for the year.

In the second part, Christian Gebara, our CRO, will go over our commercial strategy and CapEx evolution; and our CFO, David Melcon, will discuss our financial results and synergies. Finally, Eduardo will close the presentation with our strategic vision and main perspectives for 2017. And then finally, we will move to Q&A.

Now, I pass the word to Eduardo..

Thank you, Plaster. Hello, everybody. Before presenting our results for the fourth quarter 2016, I would like to emphasize how excited I am about the prospect for Telefônica Brasil.

As a result of disciplined execution of our strategy in previous quarters and years, I am convinced that that the company has built the assets, the brand, the financial strength and the team required to consolidate its leadership in the Brazilian telecommunication industry, offering the best connectivity to people, business and in the [future things that’s] [ph] driving the digital transformation of the country.

I would like to reiterate my commitment to continue creating shareholder value through solid and consistent financial results, executing with discipline our data centric strategy, focus on enabling our customers’ digital lives with the best connectivity, the best services and the best customer experience.

Now, regarding the first quarter and the full-year 2016 results, I’m very pleased to report another quarter of solid performance and strong results across the board. As you can see Slide 4 of our presentation, we would like to highlight four things. First, we continue to deliver superior and consistent revenue growth.

We were the only Brazilian operator that was able to consistently grow revenues in a very solid year. Our service revenues grew 1.8% year-over-year in the fourth quarter, and 1.7% in the full-year, where we estimated the market reduced revenues by 2.5% in the year.

For Telefônica Brasil growth was mainly driven by the mobile business, who services grew 3.9% in the quarter and 3% in the year. Growth in the mobile business was poor by the consumer segment which grew 4% in the year. Second, we consolidated our leadership in key markets.

On the mobile business for the first time in ten years, we reached at total market share of 30% while maintaining our solid lead in the postpaid segment, where we finished the year with a 42% market share. In the fixed business, we reached 4.1 million connected homes with FTTx.

Specifically we grew our fiber consumer base by 25%, reaching more than 700,000 connected homes. We are now the largest FTTH operator in Latin America. And we will continue to expand our fiber network, as it’s a future-proof fixed asset technology with improving economics. Third, we leverage synergies and efficiencies to improve our margins.

Our EBITDA grew 7.1% in fourth quarter and 7.3% in the full year. Actually, our EBITDA performed consistently during the year growing between 7% and 8% in each quarter. Key to these solid results were initiatives to cutting costs and to capital synergies. Despite inflation, we reduced recurring operating costs by 1.9% in the full year.

And fourth, we substantially increased cash flow generation. Our operational cash flow [made as] [ph] EBITDA minus CapEx grew by a robust 28.2% for the year, reaching R$5.7 billion. In the Slide 5, you can see some details about our solid results.

Now, I’ll pass it to Christian Gebara, who will give you more details about our commercial strategy and results. Christian, please..

Using big data to drive investments to the cities and sites with the highest concentration of our high-value customers both on mobile and fixed.

Being more selective on Pay TV customer acquisition and increasing return on investment; focusing on 4G coverage and capacity expansion prioritizing our customer experience; enhancing FTTH network design, unitary costs and processes; and improving logistic and refurbishing processes allowing 30% save in our CPE.

For the future our primary focus will be on the fast expansion of our high speed data footprint. In 2017, we want to reach 90% of the older population in 4G and deploy FTTH to 19 new cities nationwide.

Despite the aggressive plans in network expansion, we are confident that our efficiency efforts and stability of macroeconomic environment will maintain a downward trend on CapEx over sales for the next year. Now, I’ll pass it on to David Melcon..

Thank you, Christian, and good morning, everyone. Moving on to Slide 12, once again during this year, we have been able to reduce the current operating cost by almost 2%. Despite inflation we reached 6.3% in 2016. This is the fourth consecutive quarter with cost reduction, demonstrating the successful execution of synergies and efficiency initiatives.

Moreover, management has consistently executed a value-driven strategy based on commercial rationality simplification and enhanced use of digital channels that has benefitted our commercial and customer care cost.

As a result, we reported a very consistent growth of 7.1% in our recurring EBITDA on a year-over-year basis, and improved strongly our recurrent EBITDA margin to the highest level during the year 33.8%, increasing almost 2 percentage points compared to the previous year. On Slide 13, I will elaborate in more detail on our cost evolution by concept.

Service rendered and G&A costs decreased R$47 million year-over-year, benefitted mainly by low interconnection costs and synergies related to renegotiation of TV content contract more than compensating for higher costs related to network deployment.

In addition, G&A expenses were negatively impacted by cost incurred to generate synergies and transformation initiatives as well as penalties to enable us to terminate rental contracts as part of our real estate optimization.

Commercial expenses decreased R$45 million year-over-year influenced by the result of our rationale commercial strategy, sales force optimization and synergies in advertising due to the brand unification done this year.

In addition, customer care costs also decline due to the improved quality and higher adoption of virtual channels, such as our application MEU Vivo we launched in April also in 2016. Cost of goods sold produced R$139 million, as a consequence of the selective approach in handset, focusing strictly on higher value customers.

During the fourth quarter 2016, bad debt represents 3.2% of net operating revenues, keeping the same level as the third quarter of this year. We continue to strength our credit controls by protecting our top line growth.

Recurrent personnel cost evolution, which excludes the provision for the organizational changes in the quarter, grew 3.2% which is still below the inflation in the period despite the annual salary increase and insourcing of field services and call center employees during the year, partially offset by the restructuring program executed during the last two years.

Now moving to our Slide 14, net income for 2016 reached R$4.1 billion, almost 23% higher than the amount of the same period in 2015, mainly driven by the increased EBITDA and tower sales in the period.

Even when excluding the net positive impact of the one-time event, the net income will have grown 11% reflecting our solid financial performance and capture of synergies.

Now moving to Slide 15, we closed the year with an impressive cash flow generation through improvement in all lines, thanks to a solid EBITDA evolution, the result of this smart capital allocation combined with a strong financial discipline. In 2016, free cash flow achieved R$5 billion, 36% higher than previous year.

As a result, we continue to sustain a very solid financial profile. As of December 2016, the net debt stood at R$4 billion, down 11% year-over-year, and representing just 0.3 times EBITDA. To improve further our debt profile, we have just successfully issued our R$2 billion [local directory] [ph] program.

Turning to Slide 16, once again represents an update on our synergy evolution through the usual breakdown you have seen in the last quarter. I believe it’s important to highlight the strong execution and internal commitment of the company to maximize synergies captured in every front.

The company has already secured in 2016 a NPV of R$16 billion, more than guaranteeing the best case NPV of synergies calculating during the year. Already securing 71% of the total NPV included in our best case scenario of R$22 billion.

The increase of guarantee NPV compared to the previous quarter was concentrated in OpEx, mainly related to the saving in TV content costs leveraging on new unified contract with all suppliers.

In addition, we continue to move forward on CapEx synergies mainly through network integration and on the revenue front gradually increasing cross selling activities besides a gradual buildup of the customer base as the economy improves.

Moving now to Slide 17, our solid execution of the synergy milestones allowed us to generate solid results in 2016, contributing strongly to our cash flow generation.

Incremental revenues and OpEx savings from synergy initiatives mainly cross selling to fixed B2C customers and rationalization of commercial expenses from channel integration contributed in R$948 million for the EBITDA in the year.

Including CapEx needed for generation of synergy, especially IT integration, our direct cash flow generation reached almost R$1 billion in the year.

Indirect cash flow generated from CapEx and OpEx avoidance reached R$465 million, driven mainly by avoided investments in backbone routes using GVT infrastructure contributing to a total of R$1.4 billion in 2016.

With analyzing this number for quarter, we cannot say that in the fourth quarter contribution to the cash flow has been higher than in previous quarter. The increased synergies together with our efficiency and optimization initiatives we have been adopting support our vision of a positive trend in cash flow for the year. Thank you.

I now - I pass it out to Eduardo to develop on our strategic vision and perspective for 2017..

Thank you, David. Before going to the Q&A, I would like to comment a bit on our strategy going forward and our expectations for this year. On Slide 18, you can see a visual representation of our strategy for the midterm. We aspire to be the best alternative for data connectivity in Brazil for consumers and companies alike.

To reach this vision we will work to totalize our customers with a complete, profitable and quality offer leveraging four pillars. First, we will provide the best Internet in and out of home, in mobiles through 3G, 4G now and 5G in the future.

And in fixed we with our growing fiber network becoming the preferred hub for all digital services for our customers. Second, we will digitalize the business in the front and the back end, and we will increasingly use big data to improve decision-making.

Third, we will render process efficiency, continue to get the synergies within our operations and simplifying process to reduce waste with our zero waste approach.

And fourth, we will deliver the best customer experience in our product channels, be it for innovative and publicity [ph] stores, our segmented customer care and field operations teams or our increasingly friendly and powerful digital channels.

As foundation for all of this, we will continue strengthen the Vivo brand in order to ensure it remains the most available and aspirational brand in the telecom market in Brazil.

Specifically for 2017, you can see in Slide 19 that we expected to continue deliver double-digit revenue growth in Mobile Data & Digital services and in Fixed Ultrabroadband.

Consistent improvement in EBITDA margins, solid investments around R$8 billion per year in the next three years, focus in expanding coverage and capacity in our 4G network as well as expanding our FTTH network; and finally, payment of dividends and interest on capital of R$4.1 billion, which is 24% higher than the last year.

We are very confident our plans and strategy will allow us to continue deliver superior shareholder value. Of course, our results will be impacted by the recovery of the Brazilian economy. We are optimistic of its total prospects, but do not have assumed visibility of the speed of recovery and how it may affect the telecom sector.

Now, we can start the Q&A session..

Thank you. The floor is now open for questions. [Operator Instructions] The first question will come from Daniel Federle of Credit Suisse. Please go ahead..

Hello, good morning, everyone. My first question is, do you see a tougher competition in the high-end postpaid segment versus the low-end control plans and how to avoid losing revenues among the high-end clients? And my second question regarding interconnections, revenues in the mobile segment.

We saw that revenues - MTR revenues came in slightly higher than expect in the fourth quarter. So I’d like to understand if the first quarter is the recurring level or the third quarter is more like the recurring level of MTR revenues going forward? Thank you..

So, hi, Daniel, this is Christian. For the first question, we had a very good performance in general in postpaid for the last quarter and for the whole year. So as I showed before, our net adds are very positive and our churn is very controlled. And portability, we were positive among the key players along the year.

So we are very comfortable with our proposition for high value customers. As I also said, we launched new functionalities like family plans, data sharing control by our e-care. And I think our position remains strong. So I do see that in postpaid Vivo for the last year had a very strong performance.

I understand that in the hybrid plan as you mentioned, I think competitors may be also working in migrating their prepaid consumer base to control to hybrid as we did - we have been doing for the last years. So maybe that has impacted improvement also in the net adds for them in postpaid.

In MTR, there is always the impact of the offer of our competitors that are giving much more minutes off-net, so that may be impacting our results in this line..

So, Daniel, just to elaborate on the second one, I mean, the higher revenue coming from interconnection, as Christian said, has to do with incoming traffic from the - also from our competitors..

Okay, perfect. Thank you..

The next question will be from André Baggio of JPMorgan. Please go ahead..

Hi, yes, I want to know a little bit more about your bundled projects and, let’s say, we are seeing not much additions in the Pay TV, and fixed line broadband, so I want to know how you expect these two markets to develop?.

André, in the Pay TV you’re asking or…?.

Yeah, Pay TV, and also fixed and broadband..

Fixed and broadband, okay. Okay, so broadband and Pay TV. Okay, so in Pay TV we are very focused in totalized customers with 3P offer. So we step back in the standalone DTH, as we did in the past mainly in São Paulo area.

So now we are very focused, where we have fiber in São Paulo to sell IPTV, so that’s why we still see an incremental in revenues, and also in customer base.

And outside São Paulo we’ll be more selective with DTH, always selling through bundle with our broadband, and more selective because of all the economic situations of the country, not being so upset about volume, but in loyalty and reducing churn of broadband customers.

In the ultrabroadband or in broadband fixed as you also asked, we also being driving our growth in premium customers or in FTTx customers. We have been expanding our network and we have plans to expand even more for 2017. And again, also being selective, okay, we are preferred to use our CapEx to customers with better credit risk and better ARPU.

In other words selling more speeds, rather than being also focused in volume and with higher credits for the customer. So I think we’ve been doing well. And again, we’ve been expanding and growing our customer base in ultrabroadband..

Perfect. And if I may ask second question, what gives you the confidence that you can stop the growth in CapEx like, say, you put up a CapEx plan of three year, which is pretty much flattish versus what we saw in 2016. But in this industry we have seen CapEx going up over time as in nominal terms, in real terms, as percentage of revenue.

So what make you confident you can make this decline continue?.

I think, André, maybe then David can elaborate a little bit more. I think the exchange rate is benefiting us considerably. Okay, if you consider what we talked one year ago when the exchange rate that we see right now, and I think also we are getting scale mainly in FTTH deployment and in 4G, and also the unit prices going down.

So we are confident that we can accomplish with this. And again, as also said, about being more selective in the CapEx that we deploy for CPEs. We’ve been able to have savings there. And also as I said, DTH standalone no more, much more focused in higher speeds and our higher returns.

And also as I mentioned briefly, we are doing a lot of refurbishing of our CPEs. That’s bringing us important savings of almost 30% that we expect fully to spend on CPEs. We were able to save with refurbished of the existent installed base..

And, André, in addition just also to remind that the opportunity we have around the synergies in CapEx now that is benefiting us liberating the infrastructure from GVT and reduce the cost for future deployments for Brazil, particularly in São Paulo..

Thanks a lot..

Salaru of Itau. Please go ahead..

Hi, good morning, everyone. Thank you for taking our questions. The first question is on the digitalization process.

Could you elaborate a bit more on which revenues and cost line should benefit from it? And also, if you could give us a ballpark for what kind of margin expansion this digitalization process could generate in the coming years? That will be our first question. The second question is we would like to discuss the synergies.

We saw an interesting progress on the OpEx and CapEx saving, but revenue seems a little bit behind of the [doors of the orders lines] [ph] progress. So I just was wondering if you could elaborate what is happening on revenue synergies and what should we expect going forward. Thank you..

We had a problem here now with the connection. We could not listen to your first question..

Okay, I’ll repeat. It’s regarding the digitalization process. If you could elaborate a bit more on which revenues and cost line should benefit from it. And also if you could give us a ballpark of what kind of margin expansion should we expect going forward arising from the digitalization process. Thank you..

Okay. Susana, this is Eduardo. Thank you very much for your question. I’d say regarding digitalization now, we can see four levers now. The first one is on the e-care. We spend a huge amount of money on call center, on sending our billing to our customers.

Just to give you some numbers, you spend more than 30 million letters now with invoices to our customers every year. They have to take this bill, they have to go to a lot [ph] in order to pay and with their high commissions. Then if they have any problems they have to call up. Every call they do us is, no, no, no, it’s approximately R$5 per call.

Then if you are - you are doing this to digitalize, the e-care, gives us a huge opportunity for cost savings and also for customer satisfaction improvement. In e-commerce, everything that you can move to e-commerce there is often a high potential for savings on cost of selling for commissions [indiscernible].

E-commerce is another very important leverage for improving our cost. Third one for me will be this more related to revenues. When you’re now able to package digital services through our offer bundle, it can include minutes [ph], it can include security, it can include education. There is a huge portfolio of services. Now, it can improve our revenues.

And we are seeing this now already in our numbers. And finding some synergies across all throughout the company is a [indiscernible].

Now, as you get a company - now, as you become a company, you’re much more used to get to user information in our decision-making that includes for instance CapEx, where we saw our size and we are already doing this, there is even a huge opportunity to reduce recurrent - to reduce our - to have a smart allocation of CapEx.

So I think it’s that general concept as where to apply to our lives. Now, and I’ll say, we are all going to it more or less now in revenues or EBITDA or CapEx, but how they make all the impact just relying of our P&L. On the margin expansion, we are not going to provide guidance on numbers.

What I have seen in less than two years is that it has been improving between around - between 1.5 and 2 points every year. And there is no reason that you cannot continue to improving margin. No, I’d say, what you’re providing here is our commitment not to continue to improving margins, but we are not going to commit the number.

No, just the commitment, that there is no reason for change, they still debate that has been moving up to now..

Regarding the - Susana, regarding the second question about the synergy and revenues, I mean, so far we have captured 20% of the net present value. I mean, we knew that it was going to be lower than capturing the OpEx and CapEx initiative. We are in line with our plan.

We are in line with the plan and we are expecting some improvement in the next two year, particularly all cross selling that we are expecting outside São Paulo now in both B2C and B2B..

Yes, only to complement on that we changed the brand in April of last year. And still working on the consolidation of a unique brand in the country, and also preparing to be more cross benefits across customer base of the fixed and the mobile.

But as David said, very aligned with our plan, and very aligned with our strategy to give benefits for convergence customers rather than discounts..

Perfect. Thank you..

The next question will be from Mauricio Fernandes of Bank of America Merrill Lynch. Please go ahead..

Good morning, everybody. I think this is a question for either Eduardo or Christian. It’s about the price increases that we’ve been seeing on companies including Vivo to pass through the ICMS or VAT rate increase that happened towards the end of last year.

Have you’ve been able to recognize or see any potential impact into consumption, meaning, where the customers have been disconnecting or using the phone less, as a result of those price increases? Thank you..

Hi, Mauricio, Christian. More focusing on 2016, as I said, we had very good results. Some of the price increase also occurred in the end of last year.

And I showed we kept our very relevant growth in net adds and also very controlled churn rate, so - and also part of the strategy of some of the price increase, they were bundled of some more benefits to the customer in data and allowance maybe.

So, so far, Mauricio, we’re having good results, very good results in line with our performance, best performance. And also the launch of our family plans that give a lot of benefits, especially for the pure postpaid, because adding dependence in your plan. And controlling the data allowance and assigning how much data you want to each of dependent.

That is something unique that Vivo offers in the market or putting us in a good situation. So again, I think it’s been good. And also as you saw competitors also were managed to increase price. So I think they’re getting more rational in - for every player.

If we can, still on a similar subject, things specifically has been very - a lot more active on hybrid, actually part of I think Daniel’s next question on this.

Have you been noticing any impact in terms of whether you been losing customers or maybe customers with double SIM cards have been using more TIM? In general, have you seen any impact to Vivo from this more active campaign and new plans that TIM is offering more recently?.

Mauricio, I think we’ve been very successful, as you know in migrating customers from prepaid to hybrid. And for now we’re successful story. We know that the hybrid strategy is very focused on your own customer base in migrating prepaid to postpaid. We continue doing that and we continue having good results.

Maybe as you mentioned, my competitor now is doing better on this as well migrating prepaid to hybrid in their own customer base. I do believe the hybrids is very focused on own customer base rather than capturing customers from competitors..

Okay. Thank you..

Thank you..

The next question will be from Fred Mendes of Bradesco. Please go ahead..

Good morning, everyone. Thanks for the call. I have two questions here as well and the first one again in the mobile revenue growth. We have sort of price increases Mauricio mentioned in the last question. You also had an improvement in the mix of your client.

And the average growth in our postpaid base of like 4.7%, it was 9.5%, but the average was 4.7%. And your mobile growth was 3.9%. So just I - we do understand there was an anticipation of revenue for the third Q. We’re just wondering if there is anything else there and if you can give us a size of this anticipation of revenue. This will be great.

That’s my first question.

And my second question, talking about the plan to increase the 4G coverage to around 2017, just wondering if you’re already considering the usage of the spectrum 700 MHz and/or the refarming of the 1.8 gigahertz in order to make the 4G rollout cheaper, and when are we expecting to start to be able to use the 700 spectrum? Thank you..

Fred, it’s Eduardo. I’m going to answer the second one. And then Chris will answer the first one. Now, regarding the 4G coverage, at the beginning we had been much more focused on providing a very good coverage on the lighter cities, where we have 6% to 7% of our customers, our value customers especially.

That’s why now in the first three quarters of the year we’re having much more concentrated now on those cities. Once those cities covered, then we decide that we should accelerate the coverage to other cities. And just to note, provide you some numbers that are in presentation. In the first three quarters we have covered a little more than 40 cities.

In the last quarter, we had covered more than almost 300 to 290. And we remain now in the first quarter of this year, at the same - with the same base that we are in the fourth quarter last year. Again, that we are strong last year relating to our 4G coverage on number of cities. Once we have our already [ph] now cover the big cities.

And regarding your question about 700, yes, we are considering to go 700 throughout some of the cities, especially the north cities or some small cities that will not depend on LTE [ph] going up. And now we are progressing. We are working to provide this. We expect to launch this in Brazil now soon, in the coming months in São Paulo.

Now, it will depend on São Paulo capital, it’s supposed to turn up now end of March. But have to wait for the rest of the [indiscernible]. And now it maybe it’s not going to happen before the end of the year.

But, yes, also we are considering that as soon as we have the spectrum available, because of the TV has been turned off or because we could not turn off the TV. As you know again, it’s the case of our from seasonality [ph], we will start to use in terabits [ph].

And we can - this is another one source of efficient, because we can do much more efficiently the deployment in 700 than other high frequencies..

Can I - while I jump from the first one, Fred, you just still - do you have any other question for the second on the CapEx otherwise I will answer the first..

No, no, please go ahead..

Okay. On the first, that I think maybe three effects now. There is one that there is a regulatory effect. So when you compare customer base growth with revenue growth, you need to consider that that were impacting in 2016. There is also there is one wholesale agreement that improves results in the third quarter and doesn’t repeat in the fourth quarter.

And finally, the prepaid although we’re having a positive trend, as we showed also in the presentation, it’s still negative in the fourth quarter, minus 4%. So I think the three elements together may explain the difference that you see in the customer base growth and the revenue growth..

Okay. Thank you, Chris, and thank you, Navarro..

The next question will come from Richard Dineen of UBS. Please go ahead..

Thank you. Good morning, everyone. Thanks for taking my questions. First one is just a quick follow-up on Pay TV. Do you expect any boost to Pay TV customers from the analog TV switch off which is coming up in Sao Paulo at the end of March? And we’ve seen quite a big effect from that in other markets like Mexico.

Just wondering if Brazil is the same or different. What are your expectations there? And then just secondly on CapEx, do you have yet an estimate of the potential CapEx savings from the move from concession to authorization, less obligation to invest in the copper network, public frame-boxes [ph].

How material do you think that could be? Would it be just a few hundred million reis of savings? Could it be R$1 billion? What’s the rough magnitude of that, if you can help us that would be terrific? Many thanks indeed..

Hey, Richard, this is Christian. I’ll answer the first and, Eduardo, you answer the second. I think Digital TV is already very well penetrated in Brazil. In the cities that we saw they move from analog to digital, above 90% of customers already had the digital device.

So we don’t see an important boost on Pay TV related to this movement from analog to digital..

Hi, Richard, this is Eduardo. Regarding your question about the change of the legislation or regulation, it’s too early to talk about the impact. There is a - the law requires a few amount detailed regulation that’s not ready yet.

But what I would anticipate in that, we saw with the end of the obligation for the fixed line, we are not invested too much on fixed line anymore, sure. Most of our CapEx now is dedicated to fiber to TV to mobile. Then I’d say, I would not expect a great impact on CapEx. What you could expect, a bigger impact could be on OpEx.

There was some main [ph] of the obligation, no, we related to the concession fee that you pay now. Now, [if I consider an] [ph] OpEx you have not to pay in the future or some obligations that you have with maintenance, for instance, with [fiber phones or things like the small-shop] [ph].

Again, it’s too early to talk about impact, but I would anticipate more impacts on the OpEx, more saving on the OpEx rather than in the CapEx..

Okay. Thanks very much, Eduardo and Christian. That’s really helpful. Thank you..

The next question will be from Mathieu Robilliard of Barclays. Please go ahead..

Yes, good morning, and thank you for taking the question. I have two questions. First, in mobile, so mobile obviously doing very well notably compared to your peers. I was wondering as we look into 2017, how we should think about that.

I mean, I can see some clear positives I think between 2016 and 2017, macro is getting better, the weight of data is also higher, so the growth should have - be an impact on the overall MSR. So all these points to potentially an acceleration in 2017 from 2016 in mobile service revenues.

But I was wondering, if you could point out to some negatives that we should be aware and that could cap the acceleration? And then second question on the fixed, so mobiles as I said very strong. Fixed, I guess somewhat mixed in terms of the KPIs. And really what I wanted to understand better is why is there an acceleration in the loss of fixed lines.

I understand that the fixed to mobile substitution impact, but why would that be accelerating now compared to a few years ago? And is it just that? Also surprised to see that in the context of some of your competitors struggling a lot on fixed, [I know with respect] [ph] that would have given you the opportunity to continue to grow your presence in general in fixed? So really two questions.

Thanks..

Hi, Mathieu, this is Christian. So on the mobile, as you pointed out, the perspective is positive. Although we are very strong in the postpaid, we still have important amounts of revenues coming from prepaid. So we see a positive trend in the last quarter being less negative than it was in the previous one.

So if the economy starts to recover and mainly employment, note that maybe they’re going to be the last one to be recovered and impacted a lot in the consumption of prepaid customers, we see a positive outlook. In the postpaid, again, we are focused on the strategy that being - be successful for the last year.

We understand that we need to bring more innovation to the table, because our competitors are also moving in the postpaid arena. But we are confident that with our superior customer experience, brand aspirational, channel excellence and innovation that we always bring to the table or being strong enough to be as competitive as we are in the past.

In the fixed, as said before also, we are very focused on broadband, in Ultra Broadband. There is a loss of voice. The recent mobile replacement as you said. There is also the economy situation impacting fixed voice customers. So there is a way to save something you rather save on voice that save on data.

And we’ve seen that also declining our fixed line even in the small company. So it is a trend that is happening and maybe decelerating because of the economic situation. We do believe that with our ultrabroadband capability and infrastructure we’ve been able to gain more customers.

And as you said, when we compare to competitors that don’t offer the same speed as we do, we are able to capture customers, because the demand for more speed, upload and download is increasing and Vivo is very competitive in two arenas, and mainly when you do high speed upload and download over 100, maybe we are almost alone in this market..

Thank you very much..

The next question will be from Julio Arciniegas of RBC. Please go ahead..

Yes. Hello, thank you for taking my question. This is regarding competition. Do you consider that the market will continue being rational, having in mind that for example América Móvil posted some very strong postpaid net adds in the last quarter, and basically, it was driven by price reduction? That’s my first question.

And the second question is regarding the ARPU. Basically, in the presentation it says that the ARPU is 74% higher than competitors. Isn’t this a risk? Do you think that this could be a risk or if it - in the sense, can you give me some color about it. Why it’s not a risk? Thank you..

Julio, this is Christian..

Hi, Christian..

We expect the market to be more rational. So as you mentioned, gaining more customers, talking about my competitors, hopefully they’re also - they’re going to gain more ARPU. So it’s better that we be all rational in price, because volume is not going to drive revenues, so that’s our expectation.

Now, there is a movement, a positive movement in giving value to data that is what customers are demanding and we need to put value on that. On the ARPU, here is a blended ARPU. We have stronger contribution of postpaid in our results that also respond for some of the difference.

And also in the prepaid and the postpaid, I think Vivo is also a pioneer in bundling data. So when customers are consuming more data, so also helping us driving our ARPU up. If you think of the prepaid, we launched a weekly offer bundling SMS, voice and data, much before my competitors.

So all these effects are also driving our ARPU, it’s not - you cannot take the ARPU difference for a price difference, it’s not the same. Considering the - again, the mix that we have in postpaid and prepaid, and the penetration of data in our bundles both in pre and in postpaid..

Okay. Thank you..

And ladies and gentlemen, this will conclude the question-and-answer session. At this time, I would like to turn the floor back to Mr. Luis Plaster for any closing remarks..

Okay. Thank you, everybody, I’ll pass the word now to Eduardo Navarro to make his final remarks..

[I’d sure like to read some my message] [ph] to you. As you will know, this is my first call now as the new CEO. I’m here now for three months. And I’d like now to thank you very much, not only for the participation on this call today but on all the very constructive feedback now that you give us on a day-to-day basis.

I already have the case now to meet with some of you now and I have been very concentrated here now in this my initial period here now and do as much transition that’s already completed, is done. And I hope now that for those of you that I still have not the chance to meet with now and want to work, I have the case to do in the coming weeks.

Now, yeah, really, just thank you very much now, and to know, to confirm my wish now to be with each of you in the coming weeks. Thank you. And, Plaster, please, if you could, [these are] [ph] my remarks..

Thank you. And any additional question you may have, the IR team, myself, Maria Tereza, we will all be available to address your questions. Thank you..

Ladies and gentlemen, the conference has concluded. Thank you for attending Telefônica Brasil 2016 and 4Q 2016 results conference call. You may disconnect your lines at this time..